Fact of the Week: Tariff Increases Through November 2018 Redirected $165 Billion in Trade on an Annualized Basis, Reducing Overall U.S. Welfare by $16.8 Billion

Source: Mary Amiti, Stephen J. Redding, and David Weinstein, “The Impact of the 2018 Trade War on U.S. Prices and Welfare,” NBER Working Paper No. 25672, March 2019.

Commentary: The United States imposed six sets of tariffs in 2018, levying taxes on $303 billion worth of U.S. imports, which drove other nations to impose tariffs on $121 billion worth of U.S. exports. New analysis of U.S. trade through November 2018 found that nearly all the value of tariffs was passed through to U.S. companies and consumers in the form of domestic price increases and that by the end of 2018 $165 billion in trade was lost or redirected on an annualized basis. This costs the overall U.S. economy approximately $16.8 billion while increasing taxes by $36 billion per year. While some domestic industries have benefitted from higher prices, the net effect of tariffs has been negative, reducing U.S. welfare and threatening U.S. competitiveness abroad.